WEEKEND INSIGHTS: FDII Rules, States and CARES, Apple’s EU Win

This is a weekend roundup of Bloomberg Tax Insights, which are written by practitioners, featuring expert analysis on current issues in tax practice and policy. The articles featured here represent just a handful of the many Insights published each week. For a full archive of articles, browse by jurisdiction at Daily Tax Report, Daily Tax Report: State, and Daily Tax Report: International.

This week we look at the final regulations for the foreign-derived intangible income deduction, the CARES Act and state IRC conformity provisions, a taxpayer win in the FBAR penalty column, tax competitiveness in the Americas, and more. We’ll hear from:

• Amanda Varma and Lauren Azebu of Steptoe & Johnson on the final FDII regulations
• Cormac Doyle of Crowe Ireland on Apple’s EU court win
• Thomas Bettge, Thomas Kane, Mark Martin, and Michael Dolan of KPMG on errors in the IRS LB&I “concept unit” on accuracy-related penalties
• Steve Wlodychak of Ernst & Young LLP on states conforming (or not) with the CARES Act
• Jack Millhouse and Charles F. Schultz IV of FGMK on foreign trusts
• Robert Willens on a taxpayer win on non-willful FBAR penalties
• Peter Maher and Philip McQueston of A&L Goodbody on Ireland’s new exit tax

• Olatoyosi Lawal and Tozaye Balogun of KPMG Advisory Services, Nigeria on pandemic measures and permanent establishment

• Ernst & Young LLP professionals on tax competitiveness in the Americas

Above, a GUARDaHEART Foundation Covid-19 antibody testing site in Los Angeles on Aug. 5.

Photographer: Patrick T. Fallon/Bloomberg

Treasury and the IRS released final regulations for the foreign-derived intangible income deduction. Amanda Varma and Lauren Azebu of Steptoe & Johnson provide an overview of some of the most significant changes made by the final regulations and certain practical implications for taxpayers. Read: Final FDII Regulations Reduce Some Documentation Burdens and Delay Applicability Date

Bonus: Bloomberg Tax analysts break down the final FDII regulations in this BTAX OnPoint deck.

The General Court of the EU recently found in favor of Apple and the Irish government in a case concerning alleged breach of EU state aid rules. Cormac Doyle of Crowe Ireland assesses the significance and potential impact of the judgment going forward. Read: The Apple Case—Where Are We Now?

Thomas Bettge, Thomas Kane, Mark Martin, and Michael Dolan of KPMG identify errors in the IRS Large Business and International (LB&I) Division “concept unit” on accuracy-related penalties, publicly released July 29. Read: IRS LB&I Concept Unit on Accuracy-Related Penalties Contains Significant Errors

The CARES Act provided many tax breaks to businesses at the federal level, but it may have increased state taxes for many Americans. Steve Wlodychak of EY provides examples of the areas where state conformity to (or decoupling from) the CARES Act will have a state income tax impact. This second part of a two-part series addresses the state provisions that expressly refer to a provision of the Internal Revenue Code that was affected by the CARES Act. Read: The CARES Act Just May Have Increased Your State Taxes. Wait. What? Part 2 – Direct Changes to the Internal Revenue Code

Foreign trusts have both benefits and risks, which vary from jurisdiction to jurisdiction. Jack Millhouse and Charles F. Schultz IV of FGMK look at examples from civil law jurisdictions in Europe, so-called “tax havens” in the Caribbean, no-longer-popular New Zealand, and the unique situation in Malta. Read: Foreign Trust Jurisdictional Considerations

U.S. residents and citizens who non-willfully failed to file a Report of Foreign Bank and Financial Accounts (FBAR) may have hope of less severe penalties following a recent ruling from a federal trial court in Texas. Robert Willens looks at the decision where the account holder didn’t escape the penalties entirely but came out owing far less than the government was seeking. Read: Non-Willful Foreign Bank Account Reporting Penalties Are on ‘Per-Form,’ Not ‘Per-Account’ Basis

Peter Maher and Philip McQueston of A&L Goodbody describe differences with Ireland’s previous exit tax regime, the circumstances in which the new Irish exit tax arises, and generally how it operates. Read: Irish Exit Tax for Companies

Olatoyosi Lawal and Tozaye Balogun of KPMG Advisory Services in Nigeria look at the Covid-19 measures in the country and their implications for permanent establishments. They consider some of the unintended tax consequences and resulting tax obligations for foreign companies in Nigeria. Read: Impact of Covid-19 on Permanent Establishments in Nigeria

How attractive are countries’ tax systems for new investment? EY professionals look at how the U.S. compares with other countries in the Americas in its desirability as a location for new investment before the 2017 tax law, after enactment of that law, and after tax rate increases in which presumptive Democratic nominee Joe Biden has expressed interest. Read: Investing in the Americas—2019 Tax Competitiveness Report

Corporate Tax Chat: ROAR Digital

Bloomberg Tax chatted with Ahsan Mirza, the lead tax manager at ROAR Digital, a joint venture between MGM Resorts and GVC Holdings, a U.K.-based sports betting technology company. ROAR operates BetMGM, a sports betting app that is currently live in seven states across the U.S. With Major League Baseball, the National Basketball Association, and the National Hockey League back from a pandemic-prompted hiatus, sports betting operators like ROAR are hoping for a return to business as usual. Read more: Corporate Tax Chat With Ahsan Mirza of Roar Digital, BetMGM

From the Archive

Bloomberg Tax contributors have regularly weighed in on how the pandemic is affecting state tax issues.

State and local governments will be making distributions to households and small businesses from the federal Coronavirus Relief Fund. Bruce Hendrick, Mike Peterson, and Ted Harrington of Carrington Coleman explain the taxability of the received funds.

State nexus relief guidance could cause issues for multistate employers with employees working from home due to the Covid-19 pandemic. EY state tax practitioners provide a brief explanation of nexus and apportionment under “normal” conditions and outline what recent guidance has and hasn’t addressed as some employees return (or don’t return) to their offices.

The Connecticut Department of Revenue Services recently issued guidance on how the state will treat federal Covid-19 relief measures. Marc Finer of Murtha Cullina LLP walks through the department’s approach.

Beyond Tax

What’s happening outside the world of tax?

What’s it like appearing in court during a pandemic? Gibson Dunn attorneys share their experiences from a five-day in-person evidentiary hearing in New York. They say masks and social distancing were required, but they impacted the usual benefits of face-to-face communication—visual cues, the ability to hear clearly, and close conversations with co-counsel. Read: Lessons From a Rare in-Person Courtroom Experience in a Pandemic

As businesses begin to emerge into a post-Covid world, legal challenges are expected to arrive in waves, say EY Global Law Leader Cornelius Grossmann and Nicholas Bruch, leader of EY’s Global Tax and Legal Analyst team. They discuss findings in a new EY report about challenges facing the C-suite and trends in the move to legal managed services to remain efficient and resilient. Read: How to Address Enterprise-Wide Legal Considerations After a Crisis

The Labor Department expects employment in the legal sector to grow, and the addition of AI in law firms will only expand those opportunities, according to Nick Whitehouse, CEO and co-founder of AI contract management service McCarthyFinch. He says AI won’t replace junior attorneys, but law firms need to adapt it or risk falling behind the curve to peers and competitors. Read: The Future of Junior Lawyers Through the AI Looking Glass

Exclusive Content for Bloomberg Tax Subscribers

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Sharon Klein of Wilmington Trust examines how to pay for a child or grandchild’s education through Covid-19 and beyond.

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute, please contact Erin McManus at emcmanus@bloombergtax.com.